Lawyers Covered - September 2026

It can be tough for busy lawyers to find enough time to service clients, make it safely through the regulation obstacle course, win new work and keep up-to-date with developments, but we've got you covered! Welcome to our Lawyers Liability & Regulatory Update, in which we highlight the last month's key developments affecting lawyers and the professional risks they face.

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SRA's Section 44B Powers Finally Determined After Many Years of Debate

The decision of Mr Justice Butcher in Carter-Ruck Solicitors and another v Solicitors Regulation Authority Limited [2026] EWHC 2416 (KB) has determined that section 44B of the Solicitors Act 1974 does not entitle the SRA to compel production of documents or information that is subject to legal professional privilege. He expressed no view on whether it would be desirable for the SRA to have those powers and said that it was ultimately a matter for Parliament. This has profound consequences for existing and (potentially) past investigations and prosecutions and raises a key issue as to the appropriate scope of the SRA's investigations.

For further detail, please read our article written by Nick Bird, Helen Kerr, Graham Reid and Tom Wild.   

Online Portal proposed as alternative to Legal Ombudsman resolving low value costs disputes

The Association of Costs Lawyers (ACL) has proposed that lower-value disputes on costs would better be dealt with through a pre-action protocol requiring early transparency and disclosure (run through an online portal) rather than by the Legal Ombudsman.

Following the Civil Justice Council's recommendation that all costs disputes worth up to £50,000 should be dealt with by the Legal Ombudsman, the ACL has expressed concern that the Ombudsman "lacks the requisite expertise and capacity to deal with costs assessments and that this would not necessarily result in more proportionate disputes."

The idea behind the portal is to facilitate the exchange of information between parties and allow them to make offers before a dispute escalates and proceedings are issued. Even if no settlement is reached, a lawyer from a panel of specialists (made up of costs solicitors, barristers and chartered legal executives) could consider the matter and make a preliminary determination. More complex matters could still be referred to the court.

The ACL's proposal forms part of its wider response to the Civil Justice Council's consultation on reform to Part III of the Solicitors Act 1974, which sets out how solicitors may be paid for their work and addresses, among other things, the mechanisms for assessing and challenging solicitors' bills. The ACL agrees that the Solicitors Act needs updating but cautions the Civil Justice Council against amending or repealing elements of the statute that consolidates over 200 years of case law.

Even if the Civil Justice Council's recommendation to refer low value costs disputes to the Legal Ombudsman is implemented, this is not likely to take place in the near future. The Chief Executive of the Legal Ombudsman, Phil Cain, said in June that the Ombudsman would not be in a position to replace the courts for costs disputes for some time, even if that were the route to be taken.

Forced separation of compliance roles puts firms at risk

On 31 July 2026, the Legal Services Board (LSB) approved the SRA's proposals to separate out the roles of Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administration (COFA)

Why are these proposals being implemented?

The new proposals are designed to try to safeguard client money and protect consumers following the lessons learned from the SRA's intervention of Axiom Ince, which closed on 3 October 2023.

Why have the new proposals met opposition?

The SRA have met significant backlash to the proposed plans from the Sole Practitioners Group and The Law Society, who have argued that the cost of implementing these proposals, especially on some sole practitioners is not sustainable. Under the proposed new rules, a senior manager, or manager-owner who "unilaterally" makes management decisions about how the business is run, will no longer be able to carry out these roles. Small firms which exceed the client money threshold will be exempted from the new proposals in "anomalous transactions".

The new proposals will also apply to medium sized firms operating above the "threshold" of firms with more than one manager or owner, or firms with an annual turnover exceeds £600,000, or firms which has held more than £2 million in client money.

Sole practitioners operating beneath these thresholds must continue to seek approval from the SRA before appointing a COLP or a COFA. However, whereas before, the roles of a COLP and a COFA could be performed by the same person, whilst a manager can still continue to act as a COLP, it will be unable to act as a COFA. There is fear that forcing managers to relinquish the role of a COFA will not only just increase cost but cause difficulties with compliance, especially where the role has to be outsourced to someone with no knowledge of the business.

The Law Society has criticised the SRA for failing to provide sufficient clarity on how the rules will be implemented, for example, it has said that in practical terms, an owner-manager of a smaller firm would continue to retain control of the business irrespective of who is appointed COFA.

Further guidance is expected to be published this autumn, but the intention is to start implementing the new proposals from as early as next year.  

Rival firms vie for control of Mariana Dam litigation

The high-profile litigation over the collapse of the Fundao Dam in Brazil has become embroiled in a dispute between rival law firms over the representation of the 420,000-strong group of Claimants.

A "client committee" sought to declare that Bailey Glasser International (BGI) now act on behalf of the Claimants, in place of the firm originally on the court record, Pogust Goodhead (PG). BGI now appear to be the firm on record as acting for the Claimants, but PG has applied to the High Court for a declaration that the client committee had no authority to terminate its retainer on behalf of the Claimants as a whole.

PG's application leaves the claim somewhat in limbo, with the proceedings currently heading towards a trial on quantum in April 2027 after the High Court ruled in the Claimants' favour on liability in November 2025. PG's application is due to be heard on 5 and 6 October. It remains to be seen whether the dispute between PG and BGI will be resolved and its potential impact on the proceedings, but PG's partner firm for the case, Quinn Emanuel, has said that the timetable for trial preparation has not been affected by the dispute over representation.

SRA Annual Assessment of Continuing Competence 2026

Since 2023 the SRA has published an annual report sharing insights as to how solicitors are maintaining their continuing competence.  The report identifies trends and challenges in continuing competence and considers future processes to minimise those challenges.

In this fourth edition of the report the SRA details a broadly positive picture – most solicitors keep their knowledge and skills up to date and most firms have robust controls. 

Two recurring challenges stand out. First, evidencing meaningful reflection: in a review of 123 training records, just under half did not explain how the learning need was identified or why it mattered. Second, “narrow” learning and development: activity appears heavily weighted to technical legal updates, with limited evidence of regular learning relating to ethics and professional obligations, and limited engagement with warning notices/guidance.

The SRA also highlights practical pressure points seen in reports—especially client communication (clear explanation of risks, options, costs, timescales and deadlines) and the accurate application of legal knowledge to processes (avoiding omissions, missed steps, and weak management of key stages).

Looking ahead, the SRA signals potential rule changes (subject to approval), including requiring solicitors to keep LD records from the start of the 2027/28 practising year. The SRA also highlights possible rule changes reflecting the continuing emphasis on ethics, to require annual ethics discussions which flows from calls from the Legal Services Board and the House of Lords last year as discussed in our December 2025 blog.

Finally, the SRA highlights its continued work to strengthen competency within the high-volume consumer claims sector (there are currently 94 open investigations in relation to 68 firms in this sector) and the motor finance commission claims sector with continuing engagement with the FCA in raising standards of claims handling.

Woodville collapse and regulatory reform – litigation funding in the spotlight

The collapse of Woodville Consultants Ltd (Woodville) has exposed the risks inherent in a litigation funding market that has expanded rapidly over the last decade while remaining largely outside mainstream financial regulation.

Please read our analysis in our latest article. 

Court of Appeal Dismisses Data Protection Claim

The Court of Appeal has dismissed a claim against law firm, DWF, which had been made in relation to alleged unlawful processing of the appellants data by using personal data in litigation. The appeal was made following the High Court previously determining at trial that the processing of personal data was lawful and fair. The appeal was initially made on three grounds, but by the time the appeal was heard only one ground was advanced. That  ground was that the previous Court should have considered DWF may process the claimant's data in the future and declare future use unlawful. The Court determined that this was, in fact, an entirely new claim that had not been advanced previously before the Court at any point. The appellants therefore required permission to amend their particulars of claim (after judgment) and grounds of appeal, as well as being allowed to rely on the new claim on appeal. The Court rejected all three, commenting that the new point raised was contrary to the position agreed at trial in the lower Court, there was no good reason for not arguing the new point earlier, and the position for relief was unsustainable.

This decision emphasises the importance of ensuring all arguments are advanced in a claim and, should any amendments be required, permission must be sought from the Court. Any unreasonable delay in doing so, will not be considered positively by the Courts.

China's Supreme People's Court AI Guidance

On 7 September 2026, China's Supreme People's Court published the "Opinions of the Supreme People's Court on Lawfully Hearing cases related to artificial intelligence disputes" (the Opinions).

Whilst not substantive law, the Opinions aim to strengthen judicial protection of AI innovation, as well as the reasonable boundaries of rights and responsibilities that follow and apply the law appropriately. The Opinions are based on "relevant provisions of the Civil Code, Cybersecurity Law, Copyright Law, Personal Information Protection Law, Civil Procedure Law, and other relevant laws, it puts forward concepts and guidelines for handling AI-related dispute cases according to law".

The principles set out in the Opinions emphasise a people-oriented approach to AI and prioritise the protection of individuals’ rights and well-being, as well as addressing risks such as algorithmic discrimination and privacy infringement.  The Opinions highlight that judicial rulings should guide the responsible development and use of AI, balancing innovation with legal and ethical safeguards. The principles also call for clear attribution of liability in AI-related infringements, which distinguish between developers, providers, and users, alongside consideration of the nature and risks of different AI models.  Significantly, the Opinions stress the need to regulate the use of generative AI (eg face-swapping, voice mimicry, etc), to protect personal information, and therefore prevent abuses such as doxing, price discrimination, and unauthorised use of likeness or voice.

The Opinions also cover liability for AI product defects, autonomous vehicle accidents, and intellectual property infringements. Additionally, Courts are encouraged to use dispute resolution and to strengthen evidential rules for AI dispute cases. Collaboration with regulators and international partners is also encouraged.

Overall, the principles aim to ensure AI serves the public good, supports innovation, and operates within a robust legal and ethical framework.

Additional contributors this month: Sally Lord, Aimee Talbot and Dan Lewis